How’s inflation today? Pretty good, part 1

By Randell Tiongson on July 8th, 2009

Philippine inflation is better that what the market expected and is withing the forecast of the BSP. It looks like the BSP guys are doing something good. In fact, June inflation registered at it’s lowest in 22 years with the CPI (Consumer Price Index) registering at only 1.5%. The BSP forecasted a range of 1.1% to 2.1%. Inflation last May was at 3.3% and mid year average inflation is about 5%, well within the BSP’s annual target. The reduction on the CPI was largely due to the fall of oil and commodity prices. Last time we had an inflation rate like this was in April of 1987, if I’m not mistaken. The BSP is targetting a range of 2.5 to 4.5% for 2009 so our report card is looking good, if inflation is the basis. BSP’s policy of keeping interests low is paying off , at least in the area of controlling inflation.

How does this affect us? Well, we can all appreciate the respite from increasing prices of goods and services. Inflation for the last 2 years has been bad and last year was worse with the increase in oil. On the downside, consumers might be lax in their budgets once more. People became budget conscious when prices were rising coupled by the world-wide financial crisis which I thought was a good thing, at least on the budgetting side.

Let’s see.. we are experiencing economic growth and inflation is low — that should be good. The issue is how the benefits can trickle down to the whole population… but I’ll leave that to the policymakers to debate about.

Now, on a personal finance point of view… this is really good for us if we know how we can take better advantage of it. Catch my next blogs as I try to discuss more about this…. but let me leave you with a great tip: “Ants are creatures of little strength, yet they store up their food in the summer (Proverbs 30:25)” . Times like these? Be an ant.

2 thoughts on “How’s inflation today? Pretty good, part 1”

An interesting thing to note though is that inflation is a good measuring stick on how demand has been going for basic goods so far. That’s why another angle to the story is that prices more or less stayed down in June because there was hardly anyone buying.

The BSP has foreseen this scenario and that’s why we’re within target range. But this also means that the government and the BSP have not been successful in getting the consumers’ confidence in the system back.

The nice thing about low prices is that it’s a natural stimulus in itself, hopefully encouraging the people to reach into their wallets again because it’s cheaper now. But this should be accompanied by more government efforts to focus projects into those that will win back the trust of the people and get the economy moving again 🙂

It’s a great time to start learning again how to budget and spend properly 🙂 Will be looking at your Part 2 for this! 🙂

Great insights Mich.. you are correct. In my opinion, I don’t mind inflation to be a bit high so as long as growth is high as well. In our case, there is moderate economic growth and the low inflation is a welcome respite. In personal finance, this is the time for one to maximize investments. I’ll tackle more on it in the next blogs.